Xenophobia hurting ag

You need a conspiracy mentality to follow the logic here (if indeed it qualifies as logic)

WHILE their colleagues were out campaigning to keep their jobs, several Senators on the Senate Standing Committees on Rural and Regional Affairs and Transport have been busy saving the country from evil foreigners and their filthy money.

The object of their attention was the proposed takeover of GrainCorp by US company Archer Daniels Midland (ADM). Chief inquisitors were Senators Heffernan and Nash, Liberal and National Party respectively*.

On August 30 the committee issued an interim report in which it recommended that the Australian Competition and Consumer Commission (ACCC) revisit its decision to approve the takeover. It also advised the Foreign Investment Review Board (FIRB) to heed its warnings.

The board of GrainCorp has indicated it will advise shareholders to accept the offer. The FIRB is yet to make its recommendations.

You might think that anyone who respects private property (which allegedly includes the Liberal and National parties) would leave it to the company’s owners, the shareholders, to decide. But not, it seems, if it involves Australian shareholders selling their property to a foreign buyer.

The committee bases its recommendations on a series of assumptions about what might happen if the takeover proceeds. Chief among its concern is that it will lead to further consolidation in the grain handling sector and a lessening of competition.

The committee claims it is significant that ADM owns 16 per cent of Wilmar and that Wilmar is the largest shareholder (at 10pc, plus an indirect interest in a further 10pc) in Goodman Fielder.

It is similarly concerned that ADM owns 80pc of grain trader Toepfer International, that Goodman Fielder makes Coles' home brand bread, that Coles and Woolies have 82pc of the pre-packaged bread market in Australia, and that Goodman buys all its bulk flour from Allied Mills which is supplied and 60pc owned by GrainCorp (the other 40pc is owned by Cargill, another 'evil' foreign company).

It regards ADM's investment in Wilmar, and Wilmar's holding in Goodman, as highly relevant to the consideration of the impact on competition represented by ADM's bid. It also believes it is very likely Cargill will acquire ADM's interest in Allied Mills and that Toepfer will be taken out of the market in Australia.

You need a conspiracy mentality to follow the logic here (if indeed it qualifies as logic).

Coles and Woolworths sell a lot of the bread consumed by Australians. Goodman Fielder bakes the bread for Coles. ADM has a non-controlling share in Wilmar, which has a non-controlling share in Goodman Fielder.

Roughly interpreted, it means because GrainCorp supplies Goodman Fielder with grain and Goodman Fielder supplies Coles with bread, therefore ADM’s takeover of GrainCorp will enable it to dominate the grains market in Australia. And because about 17 years ago ADM was convicted of price collusion in the US, it is especially likely to be up to no good now.

Not much of this bears any relationship to reality.

Indeed, rather than expose the ACCC’s lack of experience in the grain industry, as it claims, the committee’s report suggests it lives in a parallel universe in which you need to be bonkers to exist.

At worst, a takeover of GrainCorp by ADM would change nothing apart from replace Australian investors with American investors. GrainCorp is already a dominant player in grain handling on the east coast and changing the nationality of the owners will not affect that.

Even if ADM were to rationalise facilities to reduce costs, or run the business so effectively that some competitors were forced out, there is no problem The ACCC has imposed an access agreement on GrainCorp that ensures competitors always have access to its facilities. And buying out competitors would require ACCC approval.

At best the takeover will result in a major capital injection into grain handling and storage, helping grain growers to get their crop into storage and transported to ports quicker and at lower cost.

And on that there is no need to take my word for it. Australia’s largest wheat producer, Ron Greentree, told the committee that GrainCorp’s investment in its logistics facilities had not kept up with market needs for 20 or 30 years, leading to degraded facilities and long queues at silos. Unless that changed, he said, growers would face rising costs, undermining their competitiveness.

Mr Greentree suggested that ADM was more likely than GrainCorp to spend the money on the infrastructure that affects farmers, due to its large capital base and more diverse sources of income. If the takeover was blocked, he said, this could have a devastating impact on GrainCorp's value and weaken its already limited capacity to fund capital investment.

The committee thought it knew better than Mr Greentree. In my view that makes it a serious threat to Australia’s agriculture future.

Foreign investment is just as crucial now as it has been in the past, and telling foreigners they are not welcome based on conspiracy theory assumptions is the quickest way I can think of to send the industry into an uncompetitive downward spiral.

*NB: When originally published on Monday, this opinion article claimed Senators Nash and Heffernan are "well known for their aversion to foreigners and their money".

Senator Heffernan contacted Fairfax Agricultural Media to clarify his stance.

He completely rejects suggestions that either he or the Senate Standing Committee on Rural and Regional Affairs and Transport are opposed to foreign investment or have any aversion to foreigners or their money.

"We welcome foreign investment in agriculture. It has been part of Australia's history," he said.

"It is, however critical that overseas investment and overseas-owned businesses operating in Australia be on a level playing field with local industry.

"We need to guard against foreign investment disturbing the capital market base or controlling the local agricultural commodity sector's competitive environment."

  • David Leyonhjelm has been an agribusiness consultant for 25 years and was elected to the Senate for the Liberal Democrats on the weekend.

    He may be contacted at reclaimfreedom@gmail.com

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    Jock Munro
    9/09/2013 6:38:42 AM

    Another consultant type theorotician elected to our National Parliament and one that is quite prepared to go on selling off the farm. His arguments for hocking everything are pretty thin, so he has to demean those with an alternate view.
    9/09/2013 6:59:36 AM

    Jock: If you are a shareholder you have a right to object as you own a part of it. Is it ok for others (non-owners/shareholders) to determine what happens on your farm?
    Jock Munro
    9/09/2013 7:35:03 AM

    Tim, I would have thought that I and all other Australians would have a fair stake in the future economic well being of our Nation! Don't be fooled by this globalisation mantra and those that push it for their own selfish agendas. We all know that we have to trade and use some foreign investment but we not need to sell off our silver in doing so.
    9/09/2013 7:37:21 AM

    well, David , on the subject of investment Mr Greentree was I believe the chairman of Graincorp for awhile and nothing much was done under his stewardship, given the PWA was gifted the network by the NSW Govt. Shareholders have pocketed quite a return under Greentree and then Taylor and now they want to flog the thing for another bucket of capital gain. Where is the evidence that ADM will not run the show the same as it has been run before? The purchase of assets doesn't automatically qualify as investment in my book, unless it comes with a plan to improve things.
    9/09/2013 8:52:39 AM

    The issues here have little to do with the virtues of foreign investment (a Holy Grail great white hope for lazy people), the issues here are about the international bullies in the grain trade being given carte blanch in the Australian grain trade by people with vested interests in doing so. The victims as always are Australian grain producers and our export reputation as the wealth and value of our export grain is transferred to these bullies, revelled in endearingly by all the free market zealots and ideological deregulation nutters.
    9/09/2013 9:11:08 AM

    Great, now The Land is running pieces from pro gun consultants come senators that believe school teachers in the US should carry guns. The flour milling part I wont dispute, its irrelevant, but all this talk that ADM might step in and build us a better supply chain just because they like us is as crazy as the belief that guns save lives!?
    9/09/2013 1:34:04 PM

    David, I guess in our democratic society we are all free to have our say. However by acting like a supreme authority and trying to demean all opposing arguments, does not constitute clear rationale for us as Australians. No matter what principles or ideologies are put forward there are always mitigating circumstances and always competing interests to be dealt with. Like it or not, Australian grain growers are at war with US and EC Govts because they intervene on behalf of their growers and against ours. As a result, ADM is a participant and enemy of our growers at times.
    9/09/2013 1:52:51 PM

    I agree with Will. Unarmed teachers has been working well for the US so far, it should continue...
    9/09/2013 2:04:49 PM

    David, principles are fine. We must have them. But we have to be pragmatic too. I am sure you and I both agree with the principle of castration as a means of selecting the best farm breeding stock, but I will bet you are not going to let me apply that principle to you and you sure as hell are not going to do it to me either. So why should Aussie grain growers have it done to their marketing and grain handling?
    9/09/2013 2:14:29 PM

    David, your free market lecture is fine but get real. There is no free market existing in the world grain trade. Our biggest competitors in grain have massive Govt subsidies underpinning their production and exports. Many of our customers are recipients of grain as aid from the subsidized producers, which adds more market corruption. ADM is a recipient of USA subsidized grain. Economics should tell you they will use that against us. So why lay down and let them take advantage of us when it suits them, just on some dream they are here to help us?
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    Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com


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